The blue-chip FTSE 100 index fell by 0.1 percent, or 7.06 points, to 6,812.69 points in early trading. Volumes were expected to be relatively thin, with New York closed for a public holiday.

Tesco retreated by 2 percent, following a 6.6 percent slump on Friday after the company cut its profit forecast for the second time in two months and slashed its interim dividend.

Tesco took another hit on Monday after Harris Associates, one of its largest shareholders, sold around two-thirds of its stake in the company. Its share price fall also weighed on rivals such as J Sainsbury and WM Morrison, whose stock prices also weakened.

"There is negative pressure building up on Tesco's shares. The dividend is going to become an issue and there is pressure on the management to review its strategy, because it's clearly not working," said Beaufort Securities sales trader Basil Petrides.

The FTSE 100 hit a peak of 6,894.88 points in mid-May, which marked its highest level in more than 14 years. But it has not yet passed the 6,900 point mark, considered a key hurdle before the FTSE can challenge record highs around 7,000 points.

Although the FTSE and other European stock markets have been propped up in recent months by expectations of new economic stimulus measures from the European Central Bank (ECB), some traders were wary about betting on big near-term gains.

"I would look to sell into rallies at the moment," said Berkeley Futures' associate director Richard Griffiths. (Reporting by Sudip Kar-Gupta; Editing by Andrew Heavens)